Please ensure Javascript is enabled for purposes of website accessibility

Why Ascena Retail Group Inc. Stock Dropped Today

By Steve Symington - Jan 12, 2016 at 1:05PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The specialty retailer had a ho-hum holiday quarter. Here's why.

What: Shares of Ascena Retail Group (ASNA) were down 13.6% as of 11:30 a.m. ET Tuesday after the company announced disappointing holiday sales results.

So what: Specifically, Ascena revealed consolidated comparable sales fell 4% year over year during the crucial holiday period, as same-store sales increases of 6% at Lane Bryant and 1% at Maurices were more than offset by declines of 1% at ANN Brands, 15% at Justice, 3% at Dressbarn, and 2% at Catherines.

To Ascena's credit, the severe decline at Justice was in line with expectations, and driven by the company's efforts to reduce excess inventory and position it well going into the upcoming transition to spring. Excluding that decline, comps would have been flat on a year-over-year basis.

However, Ascena CEO David Jaffe admitted the company was "a bit disappointed" with its holiday performance overall, adding "The holiday period for specialty retail was marked by soft traffic and unseasonably warm conditions, and was highly competitive."

Now what: As a result, Ascena's fiscal second-quarter earnings per share are now expected to be between breakeven and a loss of $0.03 per share -- well below both the company's guidance provided last month for $0.02, and analysts' consensus estimates for earnings of $0.05 per share.

That said, Ascena also reaffirmed its full-year guidance for earnings per share of $0.75 to $0.80, with Jaffe noting inventories are "well controlled" going into the new season. In the end, though, while I don't think this report should be cause for alarm for existing investors, its second-quarter shortfall does leave Ascena playing catch-up the rest of the year. As a result, I'm content watching Ascena's progress from the sidelines for at least another quarter to ensure it can get back on track.

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ascena Retail Group, Inc. Stock Quote
Ascena Retail Group, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.